Although many public practitioners feel burdened by constant change in regulations and accounting standards, they can take some comfort from the fact they are not alone.
Preliminary results from the International Federation of Accountants’ (IFAC) 2012 Quick Poll of small and medium practices (SMPs) found the challenges were similar globally, according to Australia’s representative on IFAC’s SMP Committee, Stuart Black. “Views are very similar around the world,” Black says. “For SMPs, the workload is large and many practitioners find it difficult to extract value from it.”
This year’s survey was conducted in 15 languages (including Spanish, Turkish, Romanian and Arabic) and included responses from 3700 accountants.
“The biggest challenge for SMPs is the burden of regulation by a significant margin, although mid-tier firms [11 to 20 professional staff] also cited lack of demand for their products and services, especially in Europe,” Black notes.
“There are slight regional differences, but we work in a global world and trends overseas have an impact here.”
While many respondents noted there was pressure to lower their fees, there was also concern about keeping up with the pace of change. However, the picture is not all bleak.
“Among SMP accountants globally, 32 per cent expect it to be better next year than last year,” Black says.
Christina Foo FCPA believes there are a number of key challenges facing public practitioners. “One of the major ones is how to better serve clients to retain them and still grow fee income,” Foo says. “Practitioners are also challenged by the problems relating to retaining a competent team to serve clients.”
Aside from this, she believes the continuing economic growth in South-East Asia means there are specific issues facing public practitioners working in the region. “Practitioners need to keep up with the growing expectations of clients,” Foo says. “They also face increasing regulatory requirements and higher audit and assurance standards.”
A key problem in the region is the brain drain facing the profession. “Attracting and retaining talent, balancing between competitive salaries for staff and competitive fees to charge clients are also issues for SMP practitioners,” she says.
Foo agrees with the IFAC Quick Poll that regulatory concerns are the biggest burden for SMPs. “Both regulatory concerns and attracting clients are of great concern to Asian public practitioners,” she says.
“For most practices, attracting new clients contributes significantly to increases in fee income, so there is a need to build the practice proactively.”
As in most countries, SMPs in Malaysia are concerned about the ongoing global economic uncertainty and slower growth. “This means people are generally looking for more value from the money they spend.”
Foo believes there are several areas of opportunity available to SMPs and points to business advisory services and CFO outsourcing services in particular. “Using cloud-based applications to more effectively and efficiently serve clients’ needs and to reach out beyond geographical boundaries or constraints is also important for SMPs.”
Stuart Black FCPA
Partner, Chapman Eastway
“The profession is going through the biggest change in 40 years due to new technology especially through the cloud,” Stuart Black says. “Many years ago small businesses usually outsourced their bookkeeping and accounting to their accountant.
“Then with the arrival of personal computers, the bookkeeping work went back to the business and the accountant became distant from its day-to-day affairs, but cloud technology opens up the ability for the accountant to see its affairs more regularly.”
This represents an opportunity to re-engage with clients and expand the accountant’s financial advisory role. “It can even lead to them playing a virtual CFO role for their business clients.”
Another major challenge for SMPs is the generational change in the profession. “How accountants can transition out of their businesses and protect the value of their asset the practice as they leave will be a major issue,” Black says.
“It is about how to transfer both the technical knowledge and the soft skill set to the next generation. Tactical information and the softer skills are hard to transfer.”
Problems around this generational shift and the continuing burden of regulatory change are likely to see the structure of the profession evolve, Black says. “We will need to see more amalgamation and merging of practices to deal with the increasing regulatory burden facing accountants.”
Peter Knight FCPA
Business accountant, Knight Partners
“The ongoing economic uncertainty and difficult trading conditions facing many clients means public practitioners will feel continuing pressure to outsource,” Peter Knight says. “Many practitioners will be tempted to move some work offshore, despite feeling obligated to train people here.”
Practitioners also face issues flowing from social change and increasingly tight workplace regulation. “The workplace health and safety regime will be an increasingly complicated area for practices and it will restrict what can and can’t be done,” Knight says.
He believes the ageing of the accounting profession and the lack of buyers willing to take on practices will also create challenges. “In smaller practices accountants don’t like working with others, so how will they exit if there are fewer buyers? The answer may be to consolidate, but that leads to a corporate model that is inherently unpopular as you must meet targets and KPIs.”
Knight thinks many practitioners will begin considering alternatives. “We could see more buddy arrangements. You have shared facilities where you support each other and have one receptionist, a single server and a library.”
The pace of change in public practice is unlikely to slow, he believes. “Most practitioners now just accept there will be continuing change it is about strategy issues such as how to get out of the profession or how to develop some form of shared practice.”
General manager Public Practice, CPA Australia
The need to keep up-to-date with rapidly evolving regulations, accounting standards and tax laws are major challenges facing public practitioners, Peter Docherty says.
“It is also overlaid by global uncertainty and continuing changes to small- and medium-sized clients, making the task even more difficult,” Docherty says. “However, in Australasia there is not as much uncertainty.”
There are also challenges in time management and the difficulties associated with growing and developing a practice.
“The ability to take time out to develop a value-add business is hard. At the same time, the need to manage existing client relationships is important, as 67 per cent of clients cite an ‘indifference to their needs’ as a major reason for leaving their accountant.”
He points out that while most practitioners need to attract new clients, they should remember it is more economical to retain existing ones.
“Clients need to feel engaged and ‘loved’ and that also goes for staff, as retaining staff still ranks in the top four challenges facing public practitioners.”
Docherty also believes the impact of technology is a major issue. “It is a great enabler, but it is a challenge to keep up-to-date and often it is difficult to find the time needed to do a cost-benefit analysis of moving the practice to new technologies such as cloud-based accounting.”
Although Docherty says the outlook for public accounting firms and clients in Australia and South-East Asia is positive, he feels there are a number of hurdles to overcome.
“Practitioners need to take time out and decide they want to succeed and plan at a high level to achieve it.
“It remains a time of opportunity and there are more enablers than ever before to help, but practitioners need to make time to plan and develop appropriate strategies.”
Challenges facing SMPs
31% Burden of regulation
14% Difficulties accessing finance
13% Pressure to lower prices of their products and services
13% Economic uncertainty
11% Rising costs
6% Lack of demand for their products and services
5% Attracting and retaining staff
SOURCE: IFAC 2012 Quick Poll